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G.M. Reports a $3.1 Billion Loss

General Motors said today that it lost $3.1 billion over all during the second quarter and continued to lose money in its North American operations, the focus of a turnaround effort by its chief executive, Rick Wagoner.

Separately, G.M.’s chief financial officer, Frederick Henderson, said the automaker is exploring “the industrial logic” of a possible alliance with Renault of France and Nissan of Japan.

Once initial discussions have concluded, the three will decide if any equity stakes will be involved, Mr. Henderson said during a conference call this morning with industry analysts and journalists.

Carlos Ghosn, who runs both Renault and Nissan, made similar comments in Tokyo last week.

Despite initial reports that Renault and Nissan were interested in a combined 20 percent stake in G.M., Mr. Ghosn said that would not be a focus of the initial talks, set to conclude by mid-October.

G.M.’s results showed that it made money from operations, but took a raft of accounting charges in the quarter related to employee buyouts and the sale of its financing arm, resulting in the big net loss.

Investors cheered the G.M. report, sending the company’s stock up more than $2 a share in early trading. G.M.’s stock ended the day up $1.34, or 4.4 percent, at $32 on the New York Stock Exchange.

G.M.’s shares closed above $30 on Tuesday for the first time since October, putting Kirk Kerkorian, the company’s biggest shareholder, in the black on 56-million-share stake for the first time. He began buying the shares last year at an average price of $30.10.

Last month, Mr. Kerkorian spurred the three-way talks when he sent letters to the companies, urging them to hold alliance discussions.

Mr. Wagoner, who has voiced skepticism about such an alliance, met with Mr. Ghosn on July 14 in Detroit.

G.M. officials have argued that their turnaround is gaining strength without Mr. Ghosn’s help, and used the results reported today to bolster their argument by pointing to the company’s operating performance.

Photo

G.M. reported an $85 million loss on its North American operations, which are the focus of a turnaround effort.Credit
Jeffrey Sauger/Bloomberg News

Excluding accounting charges, G.M. said it earned $1.1 billion, or $2.03 a share, in the second quarter, compared with an adjusted loss of $235 million, or 41 cents a share, in the second quarter last year. Revenue climbed 12 percent to $54.4 billion, from $48.5 billion in the year-earlier quarter.

G.M. does not issue earnings guidance; most analysts had forecast a much smaller second-quarter profit, excluding the special charges.

But the net loss reported today was more than three times the size of the $987 million loss G.M. reported in the second quarter a year ago, when Mr. Wagoner personally assumed responsibility for developing a restructuring plan for North America. The overall loss is equivalent to $5.62 a share, compared with $1.75 a share last year.

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Still, G.M. said its North American loss, after adjustments for the charges, was just $85 million, compared with a loss of nearly $1.2 billion in the same quarter a year ago. Mr. Henderson said the performance was “solid progress” and “an important sign of the turnaround getting traction.”

The earnings report revealed that 34,400 members of the United Automobile Workers union accepted buyouts or incentives to leave the company in the quarter, a crucial part of Mr. Wagoner’s turnaround effort. G.M. took a charge of $1.4 billion to reflect the cost.

That was down from the 35,000 workers who initially signed up for the programs, but U.A.W. members were given a week after the June 23 deadline to change their minds and back out, and some did.

Last November, G.M. announced plans to close all or part of a dozen factories by the end of 2008, and eliminate 30,000 jobs.

G.M. also is paying most of the cost of buyouts for workers at Delphi Corporation, its biggest parts supplier, which filed for Chapter 11 bankruptcy protection in October. Delphi was spun off from G.M. in 1999.

Including the charges, G.M. said it lost $3.5 billion on its primary automotive business, compared with a $1.79 billion loss last year. It earned $409 million on its financing operations, down from $808 million last year.

Globally, G.M.’s market share fell to 13.8 percent from 15.1 percent in the second quarter of 2005. Many analysts think Toyota could surpass G.M. this year to become the world’s leading automaker.

Toyota is set to report its quarterly results on Aug. 3.

G.M.’s most significant market share loss came in the United States, where it held 24.3 percent of the market in the first half of the year — a decline even from 2005, when its share for the full year was its smallest since the Great Depression.